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Wrongly, bailout funds can aid insurers that buy banks

The Treasury Department faces the difficult job of trying to solve the financial crisis while minimizing the moral hazards stemming from federal intervention. One proposal that could clearly have an unintended effect on consumers and the marketplace is the decision to provide subsidized taxpayer loans to insurers who become bank holding companies.

Insurers that purchase banks can get cheap federal loans through Treasury’s Capital Purchase Program and then shift this subsidized capital to their insurance affiliates. This cheap money would allow unhealthy insurers to grab more market share in the short term at levels that are unsustainable in the long term. Such actions would not only undermine healthy competitors but also spread additional risk to their bank subsidiaries receiving the federal money. The destabilization of the marketplace would make it increasingly impossible for the government to develop an exit strategy to unwind the unsustainable market conditions it helped create.

The unfortunate results for consumers and taxpayers would be more risk, higher costs, less competition and an increasing reliance on government intervention and resources. Healthy providers losing market share would have to reduce employment and increase premiums to make up for lost revenues. And even highly profitable and fiscally sound insurers would have a duty to their shareholders to line up for federal largesse to avoid being boxed into a competitive disadvantage. The vast majority of insurers, who are healthy and sound, do not currently need federal investment in their businesses.

The 1,000-member Property Casualty Insurers Association of America (PCI), which represents the broadest cross-section of insurers of any national trade association, has eschewed assistance under the Emergency Economic Stabilization Act of 2008. Despite the challenges of this economic downturn, our members remain the safest and strongest financial sanctuary in the current storm. Our insurers have behaved responsibly and continue to be generally well-capitalized and managed, providing sound and secure products to consumers. In addition, we are highly regulated at the state level for solvency. We do not need government rescue at this time and believe that such help would actually harm consumers and the vast majority of responsible insurers.

Congress has now appointed an oversight board to evaluate the Treasury rescue programs to assess such unintended consequences. PCI will be working with the board, Treasury and Congress to avoid the potential negative effects posed by the program as currently written. We believe consumers benefit in the long run much more from free and open competition.

Des Plaines, Ill.

‘NEGRO’ SONG PARODY

No longer a Republican

From Carolyn Schwartz

(Regarding article “RNC candidate distributes controversial Obama song,” Dec. 26, and subsequent coverage.) The Republican National Committee and Chip Saltsman should be ashamed of this song [“Barack the Magic Negro”] that is extremely offensive to the man who is to be the president of the United States of America. He was the choice of the people of this great country, properly elected, and should be shown the respect he has earned. This latest episode and the derisive manner in which the Republican candidates, particularly vice presidential candidate Sarah Palin, acted during the elections, are the reasons I have changed my political party — no longer a Republican. I am truly offended by the continuing behavior of this party.

Tallahassee, Fla.

Cold comfort

From Patrick Curry

I want to reassure all Obama supporters that those of us who did not vote for him will give him the same support and respect that they gave to George W. Bush for the past eight years.